You are here
Humpty dumpty and the greek tragedy
“Humpty Dumpty sat on a wall,/ Humpty Dumpty had a great fall./ All the king’s horses and all the king’s men/ Couldn’t put Humpty Dumpty together again.” There are many stories surrounding the creation of the nursery rhyme; the one that seems to fit the circumstance of this column is that from the 17th century English town, Colchester. There, Humpty Dumpty was the name given to a huge canon placed on the city wall to defend the king’s palace. However, opposing fire from a parliamentary canon knocked the wall down beneath HD and down it came. And try as the soldiers did they could not put the once mighty canon “together again.”
The Greek tragedy of the present is merely the most recent of crises that have been facing the world economy. Side-by-side with the potential economic disaster have been the challenges to the political order. Political change cannot be a reality only for the leaders of the Arab world; the protests are gathering on Wall Street, London and elsewhere. Indeed, protestations of the world political economy have been going on for over a decade from Seattle to Venezuela to several cities in Europe, with ngos and environmental groups saying to the western world that economic consumption, waste and over-exploitation of the resources of our planet are endangering the future.
Question is: can the prevailing political economy, the one initiated by the thoughts of Adam Smith, fare better than Humpty Dumpty. Can it be put “together again?” There is a sense from the mounting street protests in Europe, North America and elsewhere, from the almost paranoid and all but permanent state of nervousness of the major stock markets around the world, that increasing numbers of people have little faith in the present leaders and the policies being employed to salvage the world political economy from a permanent crash. Back in early October, this column quoted Nobel laureate economist Joseph Stiglitz as saying that the superabundant capitalism of the post WWII era as it reigned in North America and Western Europe (with negative consequences on the developing world —my assertion) had come to an end with the economic recession of 2008-2010 and the threat of the double dip recession of the present.
The possibilities of what could be triggered in Greece sent the EU led by France and Germany into panic mode, fearing potential turmoil. But the portents are not only for Europe but for the rest of the world economy that trades with Europe; that means its OECD partners and developing countries which import in large quantities the products of the industrial world. The International Monetary Fund (IMF) well describes the situation: “The world economy has entered a dangerous new phase of low growth rates and high debt.” Two weeks ago, the leaders of the European Union bloc felt they had pushed back the crisis facing the EU with the bailout deal struck with Greece Prime Minister George Papandreou.
But subsequent to agreeing, Papandreou seemed to remember the history of his country where “every cook could govern”—the home of modern democracy; or perhaps he was desirous of playing one last political shot. Whichever one, Papandreou unilaterally announced he would hold a referendum on the deal to find out if the Greek people would be willing to take further austerity measures—loss of jobs, major cutbacks in social services—in exchange for the loans to make pay- ments on its mountainous 450 billion euro debt. The possibilities of the Greeks voting against the bailout deal sent the EU led by France and Germany into panic mode and potential turmoil. But not only in Europe were the fears widespread, but in all of Europe’s trading partners, which understand the implications of contagion.
But as we know, Greece is not the only “sick man” in Europe. At differing levels of intensity, Ireland, Portugal, Spain, even Italy, have had to seek bailout assistance from the European Financial Stability Facility. Today there is serious doubt whether Italy could begin to repay its debt; and if there is concern about Greece, which accounts for a mere two per cent of the GDP of the euro zone, Italy is the third largest economy of the area, reports the BBC. The IMF has expressed the view that the world economy has entered a “dangerous new phase of low growth rates and high debt.” Among other real possibilities, a default by Greece would mean sure expulsion from the euro area, with the country then having no visible means of getting out of its crisis as private lenders and the IMF would surely not take chances on Greece without the backing of the EU.
The weekend agreement on a coalition government to replace Papandreou’s regime must give heart to the EU that the default is likely to be avoided, at least in the short run. But the crisis is far from finished. In the first instance, there must still be serious concern as to how the Greek population reacts to the severe austerity measures it will have to live through. Will there be destabilising street demonstrations as the measures begin to bite? But even more fundamentally, while the austerity measures cut back on spending, there have been no indications about possible plans and programmes for growth of the Greek economy. Stiglitz says he is hearing of the austerity measures but nothing of the “enormous potential that Greece has to grow.”
Apart from the economic catastrophe in Greece and the reactions to it, we must examine closely how and why Greece, Spain, Italy, Ireland and Portugal and doubtless others have found their econ-omies so exposed. Imagine a country such as Greece with a population of merely 11 million accumulating (and being allowed to do so) a debt of 485 billion euros. The literature on the road to the crisis chronicles a life of luxury with caviar dinners, gadgetry and Porsche vehicles being the order of the day. But for the rest of Europe the same was true: huge budget defi-cits with countries consistently spending more than they earned and the deficits going to feed out-of-control consumption. Such “riotous living,” built into modern capitalism, could not continue indefinitely.
• To be continued next week
User comments posted on this website are the sole views and opinions of the comment writer and are not representative of Guardian Media Limited or its staff. Guardian Media Limited accepts no liability and will not be held accountable for user comments.
Please help us keep out site clean from inappropriate comments by using the flag option.
Guardian Media Limited reserves the right to remove, to edit or to censor any comments. Any content which is considered unsuitable, unlawful or offensive, includes personal details, advertises or promotes products, services or websites or repeats previous comments will be removed.